Article : Keep your cool and keep your super in check Date : Wednesday November 18, 2009 Author : UniSuper. Super for the higher education and research sector.
From complacency to panic – we investors can be a fickle and emotional bunch. But keeping things in perspective can go a long way towards keeping emotions in check and making sensible decisions about your super.
No-one likes to lose
When it comes to investing, if the going's good, a lot of us tend to forget about the risks we're taking and instead take for granted that the status quo will be maintained. Enter a global financial crisis, and suddenly everyone is thinking about loss. Before you know it, complacency has been replaced by panic.
But rather than letting panic or fear (or even greed) determine your next move, keeping things in perspective and keeping a cool head will give you the best shot at keeping your super in good shape.
Don't sweep risk under the rug
What's the best way to minimise that unpleasant surprise when markets aren't performing well? Know what you're getting into from the very start and keep it in perspective.
All investments, whether cash, shares, property or bonds, involve some level of risk – and some more than others. For example, if you're invested in growth assets, it's likely that you'll experience investment losses in some years and gains in others. And if there was ever any doubt in the past, recent events have shown that investment losses can sometimes be profound and prolonged.
So how should we respond? Should we go all out to avoid risk? The answer isn't quite that simple.
Risk isn't necessarily a ‘bad guy' – in fact it's the flipside of investment return. Investments that offer the prospect of higher returns bring with them higher levels of risk. But those with lower returns bring lower levels of risk, which means that simply avoiding risk at all costs could also see your investment returns falling short of your expectations and possibly your financial needs.
Any sort of investing – super included – is ultimately about striking a balance between risk and return that you can live with; one that allows you to sleep at night, while still giving you a good prospect of fulfilling your financial objectives.
Time to make a change? Look before you leap
When investment markets experience tough times, so too do investors – we're only human. If your super statement keeps showing negative numbers, it's perfectly natural to wonder where it's all heading and whether you should make some changes. But rather than make a rash decision, take the time to review your super and the goals you've set.
The UniSuper website (www.unisuper.com.au) features a range of calculators that can help you determine whether your super is on track to meeting your retirement goals. The Super and Retirement Calculator, and the Investment Choice Calculator, allow you to test different scenarios for your super and how it's invested, and see how different investment decisions could potentially affect the size of your retirement nest egg.
You may prefer to consult a licensed financial adviser for advice. The financial advisers at UniSuper Advice can help – call the UniSuper Helpline on 1800 331 685 to find out more.
The trouble with timing
If you do decide to switch out of your current investment option(s), be sure you're doing it for the right reasons.
Investors who switch strategies when investments are underperforming – either for fear of sustaining further loss or in the hope of chasing a better return elsewhere – often do little more than crystallise their losses and miss out on any recovery in the value of those assets when the markets improve. Those tempted by strong performance in an asset class often make the switch only to find that the cycle was at its peak, and performance is now on the wane.
In contrast, those who set a long-term strategy for their super early, and hold fast during market downturns, are more likely to still be in the market to benefit in the event of an upswing.
Why go it alone?
Remember, help is at hand. Visit the UniSuper website at www.unisuper.com.au to try our super and retirement calculators, or call UniSuper Advice through our Helpline on 1800 331 685 to arrange an appointment with a licensed financial adviser. The Helpline team can also assist you with any general questions you may have about your UniSuper account and membership.
Prepared and issued by UniSuper Management Limited (ABN 91 006 961 799, AFSL 235907) on behalf of UniSuper Limited (ABN 54 006 027 121) as trustee of UniSuper (ABN 91 385 943 850). This information is of a general nature only and does not take into account your individual objectives, financial situation or needs. You should consider how appropriate this information is to your personal circumstances and also consider consulting a licensed financial adviser before making an investment decision. You should read this information in conjunction with the relevant UniSuper PDS (available from your Superannuation Officer or from UniSuper).